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Unformatted text preview: b) Speculative National Bank [SNB] with Equity = 200 and leverage = 40 II. Assume each bank is earning a profit of 1% of Assets. Calculate the ROE for each bank: a. ROE for CNB = b. ROE for SNB = III. Briefly discuss some factors influencing leverage. IV. Examine the credit risk—risk of insolvency—of these two banks under the stress of 5% each banks loans turning out to bad loan scenario as a consequence of a “financial” crisis. V. Explain briefly the problem of bailouts for the banking system...
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This note was uploaded on 02/22/2012 for the course MANEC 453 taught by Professor Jerrynelson during the Winter '10 term at BYU.
- Winter '10